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Summary:

Google (GOOG) crossed the $600-a-share threshold today, giving it a market capitalization of around $188.1 billion. The big questions is, how high can it go? $750, $1,000 or (shudder) $2,000 a share? Here is what $188 billion buys you: * 3,133 Gulfstream G550 jets a $60 […]

Google (GOOG) crossed the $600-a-share threshold today, giving it a market capitalization of around $188.1 billion. The big questions is, how high can it go? $750, $1,000 or (shudder) $2,000 a share?

Here is what $188 billion buys you:

* 3,133 Gulfstream G550 jets a $60 million a pop. Basically one for anyone with the title “manager” who works for Google.

* A whole lotta media companies: the New York Times Co. (NYT) ($2.86 billion), Reuters (RTRSY) ($16.5 billion), CBS (CBS) ($23 billion), Viacom (VIA) ($28 billion), News Corp. (NWS.A), ($71.5 billion) and Yahoo (YHOO) ($35 billion) — with money left over for buying Facebook at Zuckbuck-prices.

* 940K Virgin Galactic tickets.

* Round-trip tickets to Mars for Larry and Sergey, inflation adjusted, of course.

* The country of Ireland ($190 billion), to be renamed (B)Goog-org. Larry & Sergey can be the royal leprechauns.

  1. Google will touch 800 mark surely but without giving any tenegable product – it is the concept they are selling — good job!

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  2. Jacob Varghese Monday, October 8, 2007

    They’ll keep going up until they are no longer cheap compared to the competition.

    Google is cheap compared to Baidu (BIDU), Yahoo (yhoo) or Salesforce.com (CRM).

    Price to future earnings:
    Google: 31.07
    Yahoo: 51
    Baidu: 87.62
    Salesforce.com: 190.52

    Google is a bargain compared to those three.

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  3. The problem is an investor actually has to read a company’s filings and do some homework as opposed to complain about a P/E (which is among the most useless metrics out there). Earnings are the easiest thing to manipulate; cash flow, on the other hand has to tie.

    Take a closer look at Yahoo’s balance sheet and you’ll see:

    $2B in net liquid assets (cash+equivalents+receivables-debt-payables)
    ~$7-8B stake in Yahoo Japan
    ~$2-4B stake in Alibaba (depending on how conservative the valuation is, etc.)

    Now, add these up and you get Yahoo has $11-14B in net liquid assets on the balance sheet.

    Yahoo’s market cap was $30B before today. Subtract these out (because they do not contribute to cash flow) and you get $16 B valuation for Yahoo’s core business. Yahoo (excluding the aforementioned assets) will generate $2B in EBITDA in 2007. So, you are paying x8 EV/EBITDA multiple which is ridiculous for a large, non-capital intensive, highly liquid company. For comparison, this is a cheaper multiple than Google and even print media (newspapers have declining top line and shrinking margins). Also, recent internet acquisitions have been going for x20-25 EBITDA, just to put the valuation in perspective. If Yahoo’s EBITDA increases to $2.3B in 2008 (average Street estimate, probably overoptimistic), you are paying x7 multiple. Simple math, as I said.

    Has Yahoo’s management stunk it up? You bet. They did as lousy a job running the company as communicating the value they have on the balance sheet.

    If you are short yhoo, the math simply doesn’t work in your favor long-term. And that is not that hard to see either.

    Likewise, goog has room to go up as well, but the better risk:reward ratio is to bet on yhoo at current prices.

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  4. I’m sorry to report that you’re seemingly off by a factor of 1000 on your Virgin Galactic tickets. Aren’t the tickets only $200,000 per sub-orbital flight?

    Thus yielding 940 thousand flights?

    reinharden

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  5. I’d take Ireland if I were the GOOG guys. Then they can land their jet anywhere they want without all the ankle-biters…

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  6. I know you’re being tongue in cheek, but don’t confuse GDP with the “price” of a country. The US GDP is around $13 trillion, but there is much, much more than $13 trillion of assets in the US. GDP measures the total value added in an economy.

    Lots of business magazines get this wrong as well, with ridiculous statements like ExxonMobil is bigger than all but 16 countries. That equates GDP with annual revenues, which is also a canard.

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  7. Interesting list of comparisons.

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  8. This is the peak, it’s all downhill from here. GOOG jumped 20% in the last month or two on what? Nothing. Basically, GOOG is THE internet play for a whole bunch of morons who want a play in the internet sector and GOOG is the only option, as they’re the only ones who make any money. As such, the stock is highly inflated and the slightest prick will cause all the hot air to come flying out. I predict that prick will be the copyright lawsuits from Viacom and others and that they will burst the bubble pretty quickly.

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  9. Google will keep rocking towards the $1000 level as long as the money managers on Wall St keep seeing an increase in earnings. if its organic growth in earning it’ll just keep rocking. One slow down and ride is over.

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  10. GOOG has been out performing all the market indices S&P 500, NASDAQ and Dow Jones. This remarkable run is likely to continue in the future as well. As for me I am Bullish as ever with this stock!!!!

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